Chennai: Computer animation major, Pentamedia Graphics, has finalised it's restructuring scheme for redistribution of its assets and those of its four wholly-owned subsidiaries. The proposal is now awaiting the Madras High Court's approval.

It may be recalled, early last month, Pentamedia had proposed to transfer two of its divisions, Num TV and animation division, to its wholly-owned subsidiary, the Rs 9.2-crore equity based Mayajaal Entertainment.

The company had also proposed to merge its three subsidiaries - Kris Srikkanth Sports Entertainment (engaged in production of television serials and sports programmes), Media Dreams (film and television programme production company) and Intelivision (which owns the children's channel, Splash) with Mayajaal Entertainment.

According to Pentamedia, the restructuring is proposed to add value to its shareholders, as they will hold shares in two companies - Pentamedia and Mayajaal. Post merger, Mayajaal will be listed on National Stock Exchange, Bombay Stock Exchange and Madras Stock Exchange.

Broadly speaking, the restructure scheme consists mainly of issue of equity by Pentamedia and Mayajaal in exchange for assets and debts. Pentamedia has also proposed to reduce / reorganise its Rs 244.75 crore equity base.

The restructure scheme

According to the proposed scheme, Pentamedia shareholders will be issued 6 Mayajaal equity shares of Re 1 each, for 10 Pentamedia shares of Rs10 for the transfer of animation and Num TV division to Mayajaal. A similar swap ratio has also been worked out for Pentamedia's 6 per cent non-cumulative, optionally convertible, redeemable preference shareholders. The company has raised Rs 5 crore through this route.

Pentamedia employees, who hold stock options, will be offered similar options by Mayajaal, which have to be exercised within three months from the date of the restructuring coming into effect.

All fractional entitlements will be clubbed together and Mayajaal will issue shares in favour of a person nominated by the its board who, in turn, will sell the shares in the market and distribute the proceeds among the original shareholders.

For Pentamedia's global depository receipt (GDR) holders, Mayajaal will issue to the depository / custodian an appropriate number of underlying shares in accordance with the share exchange ratio. The depository / custodian will in turn issue Mayajaal's GDRs to Pentamedia GDR holders. Alternatively, Mayajaal can directly issue GDRs to the existing Pentamedia GDR holders.

Pentamedia has also proposed reducing its equity and preference share capital as a result of the transfer of the animation and Num TV divisions to Mayajaal. The company proposes to cancel Rs 9 of the Rs 10 paid up equity and preference shares since there will be no assets left with it after the restructuring. Therefore, the face value of Pentamedia's equity and preference shares will be Re1.

Similarly, the company has proposed to convert the two crore convertible warrants of Rs.10 each into equity shares of Re.1 each. The company will issue 15 equity shares of Re 1 each to its warrant holders for every 100 warrants held.

On the debt side, Pentamedia has proposed to settle its Rs 50 crore bank dues (Rs 30 crore to Global Trust Bank and Rs 20 crore to UTI Bank) by issuing 6.5 crore equity shares of Re 1 each. The amount has been arrived at after aggregating the dues - principal, simple / compound /penal interest and liquidated damages. The proposal is awaiting the bankers' approval

Pentamedia has also proposed utilising a sum of Rs 690.07 crore in its securities premium account as on March 31, 2003, towards adjustment of the estimated future diminution in value of certain fixed assets, capital work-in-progress and inventories.

Merger terms of three subsidiaries

The amalgamation of Media Dreams, Kris Srikkanth Sports Entertainment, Intelivision and the two divisions of Pentamedia with Mayajaal is expected to make the latter an entertainment conglomerate.

According to the restructuring scheme, the shareholders of Media Dreams, which has an equity base of Rs 7.2 crore, will get 30 equity shares of Re1 each in Mayajaal for every 25 shares of Rs 2 paid up held by them in Media Dreams.

It has also been proposed to settle UTI Bank's Rs 2.99 crore loan to Media Dreams by issuing 20 lakh equity shares of Re 1 each in Mayajaal. In case of UTI Bank refusing to accept the equity swap, the debt will be transferred to Mayajaal while amalgamating Media Dreams.

In the case of Kris Srikkanth Sports Entertainment (equity capital Rs 5 crore) the swap ratio will be 3 shares of Re1 each in Mayajaal for every five shares of Re 1 held in the former.

The swap ratio for Intelivision shareholders (equity base Rs 8.8 crore) will be 30 shares of Re 1 in Mayajaal for every 22 equity shares of Rs 10 paid up held by them in Intelivision. Inter company loans - between Intelivision and Mayajaal will stand extinguished.

On its part, Mayajaal will also settle its Rs 13 crore dues to Pentamedia (Rs 10 crore) and Anchor Constructions (Rs 3 crore) by issuing 86.66 lakh shares of Re 1 each as a compromise formula.

Along with assets and liabilities, employees of the three merging companies, Pentamedia's animation and Num TV divisions will also be transferred to Mayajaal's roster.